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Continued: Business without borders

  • Article by: ROBERT B. REICH , Tribune Content Agency
  • Last update: August 1, 2014 - 7:03 PM

Rather than subsidize “American” exporters, it makes more sense to subsidize any global company — to the extent that it’s adding to its exports from the United States.

Which brings us back to American companies that are morphing into foreign companies in order to lower their U.S. tax bills.

“I don’t care if it’s legal,” said the president. “It’s wrong.”

It’s just as wrong for American corporations to hide their profits abroad — which many are doing simply by setting up foreign subsidiaries in low-tax jurisdictions, and then making it seem as if the foreign subsidiary is earning the money.

Caterpillar, for example, saved $2.4 billion from 2000 to 2012 by funneling its global parts business through a Swiss subsidiary (a ruse so audacious that one of its tax consultants warned Caterpillar executives to “get ready to do some dancing” when called before Congress to justify it).

And what about American corporations that avoid U.S. taxes by never bringing home what they legitimately earn abroad — a sum now estimated to be in the order of $1.6 trillion?

Rather than focus on the newly fashionable tax-avoidance strategy of changing corporate nationality, it makes more sense to tax any global corporation on all income earned in the United States (with high penalties for shifting that income abroad), and no longer tax “American” corporations on revenues earned outside America. Most other nations already follow this principle.

In other words, let’s stop worrying about whether big global corporations are “American.” We can’t win that game. Focus instead on what we want global corporations of whatever nationality to do in America, and on how we can get them to do it.

 

Robert Reich is a professor of public policy at the University of California, Berkeley, and senior fellow at the Blum Center for Developing Economies. His new film, “Inequality for All,” is now out on iTunes, DVD and On Demand.

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